The crypto winter will go well into 2023, according to a market forecast analysis from Coinbase Institutional that was released on December 20. This is especially true for altcoins.
Analysts anticipate a shift in favour of "better grade brands" like Bitcoin and Ethereum in the selection of digital assets. This is dependent on a number of variables, including sustainable tokenomics, the maturity of the various ecosystems, and the relative liquidity of the market.
They lacked confidence that alternative currencies will gain significant traction in 2023.
“We think investors’ willingness to accumulate altcoins has been severely impacted by the deleveraging in 2022 and may take many months to fully recuperate.”
Required reading: Our institutional research team is out with their 2023 Crypto Market Outlook. We give our view on three key themes for 2023 and dive deep into Bitcoin, Ethereum, stablecoins, regulation, NFTs.
— Coinbase Institutional (@CoinbaseInsto) December 20, 2022
If past cycles give any indication, bear markets are often protracted events lasting at least 18 months. Given this, cryptocurrency markets may consolidate at present prices into the second half of 2023.
The idea has been validated, according to Coinbase, which added that this downcycle will go "for at least many more months" due to the trust crisis.
In the first few months of 2023, there was a low possibility that cryptocurrency performance would become independent of conventional risk assets. Additionally, Coinbase attributed the continuing liquidity shortage to FTX:
“Constraints on liquidity may also disrupt normal market operations in the short-term as many institutional entities reckon with assets being locked up in FTX’s bankruptcy proceedings.”
According to the them, higher-quality tokens and currencies, particularly Bitcoin and Ethereum, can benefit even with a downturn in the market sentiment.
The paper pointed out that long-term Bitcoin owners held 85% of the currency's circulation supply, and Ethereum's supremacy as the industry standard for smart contracts has not changed.
The FTX failure and the Alameda scandal, according to the research, will not stop the shift toward self-custody and decentralized finance.
In 2023, more rules and investor protections are anticipated to encourage institutional investors, which might finally signal the end of the crypto winter.
The value of all digital asset markets has increased by almost 2% today, reaching $846 billion. Although there are still slight ups and downs inside a range-bound channel, the momentum is still sideways.